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Markets usually operate through a cyclical structure.
Just like a river, at the beginning (in mountainous regions), it’s small, volatile and fast.
At the end, when it is about to enter the sea, it’s large, less volatile and slow.
_vs_Expected_Returns_(Growth).jpg)
Asset classes are highly volatile (large drawdowns) when starting but this is covered up by higher returns. When an asset class matures (large cap), it is less volatile and returns likewise reduce.
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Just like an arrow, the more you pull it back the further it will go when released.
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Asset Classes that are still new/young and perform well against the dollar tend to have high volatility/high returns.
Example is Crypto (Spot & Futures), US Tech stock etc
In addition, leverage also magnifies each movement thus increasing potential returns as well as risks.
Managing the positions in a leveraged position is important as a risk mitigation aspect.
[https://docs.google.com/spreadsheets/d/10G0kN7cJ0m36e9MSg-d24CQoNClb2OVLe4ls5YjyqqQ/edit?usp=sharing](https://docs.google.com/spreadsheets/d/10G0kN7cJ0m36e9MSg-d24CQoNClb2OVLe4ls5YjyqqQ/preview?usp=sharing)
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Key
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More Capital = Less Risk + More Opportunities + More Profit + Lower Expenses
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Ref: Google AI mode
This image illustrates a core principle of investing: mathematical asymmetry. Because you are trading with a smaller amount of capital after a loss, you need a higher percentage gain just to get back to your starting point (break even).
The formula used for these calculations is:
Recovery % = ((1 / (1- Loss%))-1)*100
Simple Breakdown by Level
Imagine you start with $100. Here is how the math works for each level:
Ref: https://in.pinterest.com/pin/2674081021026305/
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